Following a roller coaster ride for used EV values over the last 18 months, Cap HPI’s head of forecast strategy Dylan Setterfield gives his prognosis for 2024.

Dylan Setterfield, head of forecast strategy at Cap HPI

The used market for BEVs is likely to remain highly complex for some time and the high prices, fuelled by robust demand in the middle section of 2022, are a distant memory.

Increased used volume and many issues impacting demand combined to bring the ‘perfect storm’, resulting in eye-watering decreases in used values, which started a little over 18 months ago. Several models fell in value by more than -40% and a handful more than -50%. BEVs are now down -21% year over year at 36/60 [three years/60,000 miles]; relatively close to the overall market (-15%),  maintaining the improvement from the -36% in September and expected to continue to ameliorate significantly.

It was not a surprise that values came down in 2022/23. If anything, the most surprising element was just how long values had remained strong during 2022, but the speed of reduction when it came was brutal.

Many models continued to stabilise or increase slightly in value towards the end of 2023 as the used market for BEVs outperformed other fuel types, but in January 2024, values for BEVs (and plug-in hybrids) dropped by around -1.8% at 36/60, with the rest of the market flat.

In February, BEVs dropped by -1.7 %, with PHEVs one per cent better at -0.7%, compared to the small positive movements for other fuel types, and March was -2.3% against a broadly flat market. March saw a fall of -3.7 %, but variation by model has undoubtedly increased, and some models which appeared to have settled are now seeing renewed pressure.

Current market overview

Used battery electric vehicles are still selling as quickly as other fuel types on dealer forecourts – dealer demand seems to be less strong than consumer demand, with some steering clear of BEVs due to catching a cold when values dropped and the majority of independents still not stocking BEVs at all. Those businesses that are trading in battery electric cars seem happy to seize the profit opportunity of selling the same number of vehicles at a higher margin.

The used market clearly can cope with plenty more BEVs. The volume of BEVs will continue to increase in the coming months, but many models already appear very attractively priced following the previous reductions, and we expect the rate of used car price falls to slow again.

Buyer demand in the used marketplace is back to previous levels. Although a small number of trade buyers remain selective, demand is considerably higher than it was at the beginning of the year. It is expected to remain robust, especially for models at the lower end of the price spectrum.

On average, trade prices for the majority of battery electric models remain below conventionally fuelled versions of the same model, where both fuel types are available. This is the case at all ages and by an average of 14% at 48/40 (an increase on last month, equivalent to over £2,400 and back above where it was at the beginning of 2024), and this has now filtered through into retail prices in many cases.

At 12 months old, BEVs until recently were retaining an average trade price premium over ICE equivalents, but this has now been eroded and has converted to an average penalty of -2% (approximately -£775) as newer models are now being seen in the used market in greater volumes.

New car market

Much has been made in the press of the discounts now available on BEVs, but the majority of existing models are now massively below the list price, following the drop in the previous used car price. There has been more pressure from discounts on nearly new values for petrol and diesel cars for some models, although in some cases, differential interest rates may act to narrow the monthly payment gap between new and used. Later in the year, we expect a number of models to have list prices realigned and discounts to be reduced accordingly.

The zero emission vehicle mandate is being implemented as originally planned from 3 January 2024, nominally requiring OEMs to meet a minimum proportion of 22% BEV this year.

It should be noted that there are detailed ‘flexibilities’ available to manufacturers, and some have already indicated to us that they are planning to avail themselves of various options, as they already know they will not meet the mandated proportion in 2024.

Despite this, many manufacturers are still focused on maximising BEV sales this year, and this has resulted in excessively large new car price discounts in some cases. Those models where large discounts and differential interest rates have combined to make new cars cheaper than used have resulted in significant reductions in used values.

Remarketing trends

Extreme variation in remarketing performance persists; it is still fairly common for the performance of individual BEV models against CAP Clean to vary between 80% and 120%, although this is much less than the variation seen earlier in the year for many volume petrol and diesel models.

Following the downward movement in prices, nearly new used values for almost all BEVs are now back well below cost new. However, some models still appear to have further to fall, as indicated by our continuing negative editorial adjustments in our forecasts.

Our expectation for April was for used car price reductions slightly favourable to traditional seasonal norms. Unlike March, performance was remarkably consistent overall during the month, and the final monthly movement came in at a normal seasonal level of -1.5%. Trade demand eased as we predicted, with the Easter break providing the expected seasonal turning point. We expect May overall to perform in a very similar way to April.

We are now past the period where bulging order banks at the largest fleets have been fulfilled, resulting in a short-term glut of used volume. This is starting to ease; the further the year progresses, the more the market will feel the benefit of reduced new car registrations through the pandemic, translating into lower levels of overall used car supply and subsequent improvements in used values.

Looking forward

Overall, supply and demand for BEVs will continue to wax and wane over the longer term, but consumers retain the desire to reduce emissions, and even in the minority of cases where there is a higher capital outlay, the cost of ownership situation will remain favourable under any sensible charging regime. There is still the prospect of new Clean Air Zones, for example, in Glasgow, and updates and extensions to the existing schemes, further fuelling demand for lower emission vehicles.

A short-term increase in fuel prices will also provide a temporary boost in levels of BEV interest. There are further signs that retail prices are now reflecting some of the reductions in trade prices as aged stock is disposed of and these cheaper prices are also likely to further stimulate consumer demand